Can I save tax like this when made redundant?

milto81

Can you wave your notice period and take the sum tax free in your redundancy package?

I have been selected for redundancy and was wondering if I can agree with my company a 2 stage process to try and minimize tax.
1. Agree to terminate my contract and waive the notice period in my contract.
2. Agree to a redundancy package which is the stat min + 1 months gross salary(the notice period)

This would save me the tax payment and the company their employers NI. The only downside I can see is slightly less accrued holiday pay through the notice period, 1 less NI payment and 1 less pension contribution.

Is this legal and acceptable? I am only likely to get statutory minimum and am trying to maximise by payout as I don't know how long it will have to last.

Thanks

SarEl

No necessarily. Most packages are agreed at net payment, not gross. Which may save both you and the employer money. But it won't give you "cash in hand".

Pete111

Nope - the notice period will most likely be contractual and/or statutory.

Check your contract - if you have a PILON clause then you need to pay tax on any notice that is paid out to you. Even if you don't have this clause, the company still may not be able to pay you your notice tax free as the HMRC has clamped down on this in recent years citing previous 'custom and practice' of paying notice in leiu as being effectively contractual for a companys employees

That said there are always ways and means, but most will require the company to basically 'bend' the facts and accept a level of risk from HMRC catching them out. In short they probably won't do it.

highguyuk

Why would your company want to bend the rules to help an employee who is leaving the company and will no longer have anything to do with them?

milto81

Thanks for all the replies I took the don't ask don't get approach and my employer is investigating with the appropriate accountants and HR companies as to what they can do within the rules, to aid both parties.